TWIG Morning Minute – 5/25

This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Wednesday May 25, 2016.

Markets were positive in the overnight with July corn making another run at 4.00 and the July soybean contract making yet another push toward 10.80. Minnesota wheat sits on front month support near 5.20 while July KC and Chicago wheat contracts toil near contract lows, below the 100 day EMA.

THE 8-14 DAY FORECAST LOOKS FANTASTIC

Above normal temps and frequent rains are projected through the next two weeks, with widespread boosts in soil moisture from rains in the central plains. Rain follows again in the next week. The GFS in early June projects a trough of low pressure to sink into the Plains, which will trigger a modest cool-down and trigger needed rainfall across the Southeast. The EU model has the Trough farther east with better rains for the Delta and the Southeast.

SOYBEANS: Were hearing reports of weaker crush margins in China and better yields being seen in Argentina. The idea that spec longs have deployed resources to the long side in record numbers has me wondering how much can be left in the bullish price tank without a US weather story. As of right now there is little in the way of weather worry. Yes, the eastern belt is slow to plant but that could be bearish beans as if folks throw in the towel on corn, they move toward beans. I’ve heard the trade is looking at 2 million more acres of soybeans in the June report. I think that’s a little ambitious but I think we can assume acreage is above 82.5 which would be around a million acre increase (prices have rallies 1.80 since the March survey).

CORN: News flow has turned positive in recent weeks reports of end users screaming for supply in both Brazil and China. Livestock margins are fantastic if you aren’t feeding cattle, hogs and chickens especially. IN the case of hogs, I’m hearing profit margins are off the charts. This has caused producers to hit the gas to increase numbers produced. There is a need for soybean, cornmeal and DDGs. I think July corn eventually gets above 4.00 and settles there, but for how long? A test of 407 (April high) feels inevitable. I would be targeting 420 as a level for new crop corn sales.

WHEAT: There isn’t much to say about wheat that will cause buying. Spring wheat conditions are fantastic and moisture is expected in the KC region throughout the next 2 weeks which should finish off the crop. The only real bullish cards I see come in the way of higher corn prices (feed sub) and an acreage story developing next year. All US wheat acres are down 20% from 10 years ago. Next year could see the lowest planted total in a century. IF demand would creep up down at these prices, I’m not sure future supply is ready to adjust. That said, current supply looks so large right now it may not matter. The only wheat I’m buying here is Minnesota near the 100 day EMA.

COTTON: Prices jumped off the 100 day EMA yesterday. I look for tests of the recent highs near 6370 before the 100 day ema is challenged again. (60.83) I look for a move toward 65 before I look to put major hedges on at this juncture.

CATTLE: Bearish news across the board except in cash. Demand is slow and a holiday weekend won’t do sellers any favors, but the cash cutouts remain sideways. Many think production for the year is topping right now, which is hard to argue with. I can’t see supply numbers continuing to creep higher with the cattle crush doing what it’s doing. Feels like Q feeders and fats are headed back to recent lows. I wouldn’t be establishing hedges down there though, especially on the feeder side. I think the feed market is due for a correction and we could see feeder cattle catch a bump on that. I’ll let you know if the Cattleman says anything different.

Subscribe to This Week In Grain

This Week In Grain - This Week in Grain (T.W.I.G.) is a weekly grain and oilseed commentary newsletter designed to keep grain market participants on the cutting edge, so they can hedge or speculate with more confidence and precision.

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Reader Interactions

Your email address will not be published. Required fields are marked *

Comment

Name *

Email *

Website

About John Payne

John Payne is a Senior Futures & Options Broker and Market Strategist with Daniels Trading. He is the publisher of the grain focused newsletter called This Week in Grain, along with being a co-editor of Andy Daniels’s newsletter, Grain Analyst. He has been working as a series 3 registered broker since 2008.

John graduated from the University of Iowa with a degree in economics. After school, John embarked on a 4 year career with the United States Navy. It was during two tours in Iraq and the Persian Gulf where John realized how important commodities are to the survival of society as we know it. It was this understanding that brought about John’s curiosity in commodities. Upon his honorable discharge in 2007, John’s intense interest in the world of commodities inspired him to move to Chicago and pursue his passion in a career in the futures arena.

After a three year position with a managed futures firm specialized in livestock trading, he was given the opportunity to join the team at Daniels Trading. Being in the business and seeing how other IB’s operated, it was the integrity and straightforward approach of the Daniels management team and brokers that attracted him to make the move. Since joining Daniels, John has broadened his fundamental and technical analysis of the markets even further. John has been writing his newsletter This Week in Grain under the Daniels banner since 2011.

Working in high pressure industries like the military and capital markets, John has learned the value of preparation in times of stress. He believes that instilling within his clients the value of a good plan and a cool head for dealing with the day to day swings of commodity markets. He treats every client as a teammate, understanding that his job is to help clients achieve their goals, whatever they may be.

John is a proud supporter of the Iraq and Afghanistan Veterans of America, the Veterans of Foreign Wars and the National Corn Growers Association. When he is not working, he enjoys athletics of all kinds and spending time with his wife and their pets.

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.